- BlackRock Inc. and other major financial institutions are working on plans to accelerate the closure of coal-fired power plants in Asia in a bid to phase out the use of the worst man-made contributors to climate change.
The world's biggest asset manager is partnering with Citigroup Inc. HSBC Holdings Plc and Asian Development Bank to study the proposals, according to people familiar with the matter who asked not to be named discussing a private matter. BlackRock is testing the plans by its real assets unit, one of the people said.
Proposals being led by the Asian Development Bank and Prudential Plc would involve buying coal plants in developing economies in Asia and operating them for as long as 15 years before closing the sites ahead of current schedules. 'The world cannot yet hit the Paris climate targets unless we accelerate the retirement and replacement of existing coal-fired electricity, Don Kanak, chairman of Prudential's growth markets division, said in a statement. 'This is especially in Asia where existing coal fleets are big and young and will otherwise operate for decades.
Representatives for Citi and BlackRock declined to comment on the issue. HSBC did not immediately respond to the emailed queries.
Even as governments set out goals to reduce greenhouse gas emissions, coal remains a principal source of energy for many countries in Asia, with China and India accounting for two-thirds of global demand. Consumption in key markets is forecast to increase for the next few years and coal-fired electricity generation will hit a record in 2022, according to the International Energy Agency.
By operating and acquiring commercial power plants at a lower cost of capital than is currently available to commercial operators, ADB and partners would be able to generate similar returns over a short period, facilitating the early closures of the assets, Reuters reported.
Funding for the planned energy transition mechanism is expected to come from both public and private institutions, although targets have not been set, said Ahmed M Saeed, the ADB vice president for East Asia, Southeast Asia and the Pacific.
The lender is currently in discussions with governments in Vietnam, Indonesia and the Philippines about the proposal and may see a pilot acquisition that is 'big enough to matter' next year, Saeed said. ADB will start raising funds at the COP 26 climate conference in November.
According to Saeed, if the plan is successful, it will need countries to commit to not replace eliminated coal use with other fossil fuels. The timeframe to formally shutter the assets will allow sufficient planning, and help to avoid consequences such as poor regions suddenly losing access to heating.
The proposal would enable developing countries to make big progress on climate goals in the next 10 - 15 years, not deferring heavy lifting until mid century, said Prudential's Kanak, who originally devised plans for the mechanism.
Citi and Trafigura foresee 'coal to zero' mining vehicles with 14 mines.
Earlier this year, Citi met with large institutional investors in London to pitch a vehicle intended to sell coal mines and acquire them before 2045.